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Security Brokerage

VINIEGRA, CAREN Q | 4LM2 | Principles of Finance


What is a Broker-Dealer? Company: Philstocks Financial

Multiple Roles of a Broker-Dealer
Reason of existence
Current Issues
Two Types of Brokers
Addressing the Issues
Brokerage Commission Global/National Issues
What is a Broker-Dealer?

A broker-dealer is a person or firm in the business of buying and

selling securities, operating as both a broker and a dealer,
depending on the transaction.
The term broker-dealer is used in U.S. securities regulation parlance
to describe stock brokerages, because most of them act as both
agents and principals.
A brokerage acts as a broker (or agent) when it executes orders on
behalf of clients, whereas it acts as a dealer, or principal, when it
trades for its own account.
What is a Broker-Dealer?

Broker-dealers fulfill several important functions in the financial

Providing investment advice to customers
Supplying liquidity through market-making activities
Facilitating trading activities
Publishing investment research
Raising capital for companies.
May range in size from small independent boutiques to
large subsidiaries of giant commercial and investment banks.
Multiple Roles of a Broker-Dealer

Broker-dealers are buyers and sellers of securities, and they are also distributors of
other investment products.
They perform a dual role in carrying out their responsibilities.
They act on behalf of the brokerage firm, initiating transactions for the firms own
They handle transactions, buying and selling securities on behalf of their clients.
In their dual roles, they perform a couple of vital functions; they facilitate the free
flow of securities on the open market
They buy or sell securities in their own accounts to ensure there is a market in
those securities for their clients.
Definition: Securities

Represents an ownership position in a publicly-traded

corporation (stock)
a creditor relationship with governmental body or a corporation
rights to ownership as represented by an option.
A fungible, negotiable financial instrument that represents some
type of financial value.
The company or entity that issues the security is known as the issuer.
Two Types of Brokers

Process: Opening an Account

Invitation conducting seminars to give clients full knowledge

about what they are about to enter (free of charge)
Disclose information forms, truthful about information, IDs:
KYC or Know Your Customer/Client process required by law
mandating clients to disclose their personal information and to be
truthful about the information they provide by presenting valid IDs,
filling up forms, and other means to prove they are not giving
fictitious personalities (e.g. personal appearance, video calling,
appearing in embassies for OFWs, etc.)
Process: Knowing your Risk Profile

When buying a particular stock, the person should risk his gauge
risk profile
The risk profile will be the basis of the decision on what to buy and
when to sell
Safe side blue chips lesser risks (part of our day to day life;
Meralco, San Miguel, PLDT) established and stable companies.
Movement of stocks close to 5-10%
Growth side higher risks but may possibly give bigger returns
Measure the risk by looking to the macro and micro levels
Company Indicators
Earnings Growth
Material Developments

Economic Indicators
GDP Growth
Exchange Rate
Process: Knowing your Risk Profile

Risk does not always reside with the company; it may also reside
with the person investing. Risk tolerance does not match the stock
Long position goal when buying a stock. A person buys a stock,
wait for the price to increase, and then sell. Buy low, sell high
Short selling
Buying Selling
Investor Investor

Broker PSE Broker

Settlement PDTC
Banks (Depository)
PDTC (Clearing Settlement
(Depository) House) Banks

Broker Broker

Brokerage Commission

A stockbroker is compensated for his services in executing orders on

the Exchange through commission charges, which are paid by both
the buyer and seller to their respective brokers.
For trade transactions covering equity and equity-related products,
the maximum commission rate is 1.5% of the total transaction cost
plus 12% value added tax (VAT). The minimum commission rates
depend on the amount of the transaction.
Transaction Value Minimum Commission

Php100 million and below 0.25%

Above Php100 million up to Php500 0.15% but not less than Php250,000

Above Php500 million up to Php1 0.125% but not less than Php750,000

Above Php1 billion up to Php5 billion 0.1% but not less than Php1.25

Above Php5 billion up to Php10 0.075% but not less than Php5 million

Above Php10 billion 0.05% but not less than Php7.5

Company: Philstocks Financial, Inc.
Company Overview

Geared towards a more technology-driven stock market industry,

Philstocks Financial Inc. continuously innovates its products and
services to make the stock market more accessible for the investing
Since its establishment in 2001, we are consistently endeavored at
providing precise and top quality trading experience through
robust technology and high quality of service and customer
support. Our trading platforms are employed with state-of-the-art
technology which allows our investors, traders, and licensed agents
to conduct their trades with convenience and reliability.
Reason of the Institutions Existence

Avenue for the public to participate in the companys growth

It is the private companies goal for expansion and funding is to go PUBLIC
reason why they enlist themselves in the Philippine Stock Exchange.
Brokerage companies bridge between public and companies
Generally, every country need a stock market for them to help businesses grow
They have several options: borrow money from a bank, liquidate some of their
assets, OR sell a portion of their company to the public
Reason of the Institutions Existence

This also provides an avenue for individuals to participate in the growth of the
company and the economy as a whole
The governments advocacy is for people to become participative in the growth
of the economy. And to be able to participate, one must have a purchasing
power and an earning power.
In the stock market, a person may buy directly shares of stock of those publicly
listed companies, and in turn, one may turn an entrepreneur already because he
becomes part-owner of the company. And when the company grows, the
investment also grows.
More money flowing in the company, the better.
Current Issues

Lack of awareness about stock market less than 1% of

the population of the country
Lack of products
Addressing the Issues

Education campaign to give the public the knowledge about

investment opportunities on equities.
Corporate Social Responsibility: Philstocks is an advocate of
financial literacy. Our company goes out of the way to provide free
and informative stock market learning sessions. This is our
contribution in building a more financial literate society
National/Global Issues

Interconnectivity of the countries

produces a ripple effect
2007-2008 Crisis/Black Monday, etc
Stock market is driven by sentiments
Duterte Administration remarks towards
U.S. Investors are becoming sentimental
People tend to act based on
Market normalizes over time as part
of the economic cycle
Philippine Stock Exchange, Ayala Philstocks Financial, Inc., Bonifacio Global City